House kills bill to release online travel companies from taxes in 12-11 vote

After an afternoon of heated debate, the House Finance and Tax Committee voted 12-11 against a bill by Rep. Jason Brodeur, R-Sanford, that would prohibit online travel companies from paying any additional tourism taxes on the wholesale cost of the hotel rooms they sell over the internet -- essentially exempting them from paying a tax on the retail cost.

As the committee continued to meet, members scrambled to come up with Plan B. Their options are to persuade someone who voted against the bill to reconsider his vote, take it up again and reverse the vote or postpone the bill so it doesn't die.

The measure is the fourth year the multi-million battle over tourism taxes has come before lawmakers, but this year it has taken on a new twist. Brodeur's bill would exempt online travel companies from paying additional tourist development taxes rather than try to force the companies to pay taxes on hotel rooms at the same rate the hotels pay.

At issue is the practice by online travel companies such as Expedia, Orbitz and Hotels.com that buy up blocks of hotel rooms from hotel owners at wholesale rates. Then, the company marks up the price of the room, markets it, and sells it online to customers. But rather than remit taxes based on the rate charged customers, they pay sales tax and local tourism taxes based on the wholesale price and keep the difference.

Florida-based hotel chains argue they are put at a competitive disadvantage because the online companies bundle the taxes and fees into a single cost while they disclose that they tax customers based on what they charge customers.

"Either fix it on the wholesale rate or allow the consumer to clearly understand what this transaction is,'' said Richard Pinsky, lobbyist for the American Hotel and Lodging Association. "This bill favors one side of the industry and you're picking a winner and loser."

Local government officials argue that the tax should be based on the room rate customers pay, not the price the online travel companies collect. Legislative economists estimate it costs local governments about $29 million a year in lost tourism tax revenue and costs the state about $40 million in sales taxes.

It's a battle Florida's tourism-heavy counties and hoteliers have been fighting in court and, in some cases, reaching settlements.

Brodeur said that ending the court cases should motivate lawmakers to pass the bill. because, without it, "we would continue to see the tax policy decided in the courts and what I fear is the judiciary would be deciding our tax policy and not us.''

But several members were uncomfortable with the ability of online companies, most of them based out of state, to collect the undisclosed fees without customers knowing.

"It’s really troubling to think that somebody thinks they are giving their money to pay for taxes when it's really going to the profits of corporations,'' said Rep. Jose Diaz, R-Miami.

Rep. Scott Randolph, D-Orlando, urged the committee to either require the online companies to disclose their tax rates or require them to tax at the same rate as hotels. "We're setting a bad precedent here if we suddenly start saying we're going to start charging people based on wholesale rates, not retail rates,'' he said.